topic analyze the supply and demand of the gas market in vietnam and propose solutions

Despite the Government’s greatefforts in renewing the petrol price management mechanism, limiting dependenceon world prices through self-manufacturing of refining and petrochemicalproduc

VIET NAM GENERAL CONFEDERATION OF LABORTON DUC THANG UNIVERSITY

FACULTY OF BUSINESS ADMINISTRATION

TOPIC: Analyze the supply and demand of the gasmarket in Vietnam and propose solutions

Supervisor name: Mr Pham Van QuynhGroup: 1

Member’s name: Do Hoang Nhan Tam – 721K0340Huynh Minh Khoi – 721K0415Lee Eunhye – 721K0458Pham Le Bao – 721K0315

Nguyen Do Thanh Hao – B21V0008Tang Nguyen Mai Vy – 721K0444

HO CHI MINH CITY, 05/2022

Chapter 2: ANALYZE GAS MARKET IN VIETNAM 10

1 Demand of the gas market in Vietnam 10

1.1 Income 10

1.2 Tastes 11

1.3 Expectations 11

1.4 The number of buyers 12

2 Supply of the gas market in Vietnam 13

2.1 Input Prices 13

How are high fuel prices impacting the economy? 13

2.2 Technology 15

Petroleum and other liquids 15

2.3 The number of sellers 17

Major Companies of gas and petroleum marketing in Vietnam 17

It is a clear fact that all sectors of the economy are greatly influenced by the oilindustry When the price of oil changes, it is certain that all other commodities willalso move, thereby affecting the stability of the economy and especially directlyaffecting people’s lives.

In the context of the current volatile gasoline prices, price stabilization is a topissue in the strategy of stabilizing and developing the economy and controllinginflation

Although Vietnam is an oil-rich country, it has to import almost 100% ofpetroleum products to serve domestic demand This makes domestic gasolineprices closely dependent on world gasoline prices Despite the Government’s greatefforts in renewing the petrol price management mechanism, limiting dependenceon world prices through self-manufacturing of refining and petrochemicalproducts, gasoline prices have not stopped Strong fluctuations cause difficultiesfor businesses and people This has once again raised problems with the currentpetrol price management mechanism

1 Development history of Vietnam’s petroleum industry

In 1858, French army raided Da Nang, opening the war to invade Viet Nam, alongwith the first colonial exploitation (1897-1914) of the French colonialists in ourcountry, Petroleum and other sophisticated technical products of Westerncivilization are present in Vietnam

Since 1898, Western petroleum capital has come to Nha Be Port, Hai Phong Portand selected the locations of Nha Be Petroleum Depot and Thuong Ly GeneralPetroleum Depot (today belongs to Petrolimex) as the territory for businessactivities petroleum.

After Dien Bien Phu victory and the signing of the Geneva Agreements, the Northwas completely liberated On 29 July in 1955, Comrade Do Muoi- Chairman ofth

the Military Commission of Hai Phong city (former General Secretary of theCommunist Party of Vietnam) signed an order to requisition Thuong Ly OilDepartment – an important milestone for the birth of the petroleum industryVietnam oil On 29 July in 1955 became the date of establishment of Region IIIth

Petroleum Company today

On 12 January in 1956, the Ministry of Trade issued Decision No.09/BTNth

establishing the Petroleum Corporation – the predecessor of the Vietnam NationalPetroleum Corporation today

Along with taking over and restoring the Thuong Ly Oil Department, thecoporation urgently built new depots in Duc Giang, Ben Luc, Viet Tri, Nam Dinhand Bac Giang to promptly serve the petroleum needs of the petroleum industry,industrial parks and important economic zones, then expand petroleum supplyactivities throughout the North Well perform the task of ensuring petroleumdemand for the case of recovery and development economy to build socialism andfight the destructive war of the US imperialists in the North.

From war to peace, from fragmentation to concentration, the petroleum industryfaces new opportunities and challenges The Corporation embarked on restoringthe destroyed petroleum facilities in the North, taking over the petroleum facilitiesand organizing the petroleum supply network in the Southern provinces The Corporation implements the innovation and development strategy in line withthe Party and State’s guidelines, gradually shifting the petroleum business to amarket mechanism under the management of the State The Corporation at thesame time innovates in three aspects: organizational structure, methods, prices,

business, organization, training and development of human resources, informationtechnology

Changing from a subsidy mechanism to a business accounting, from a unit whosesole task is to receive, store and distribute petrol and oil according to orders, to astate – owned enterprise that plays a key role in ensuring gasoline demand oil ofthe whole society, directing, regulating and stabilizing petrol and oil prices.Petrolimex has constantly grown and developed

Up to now, the Vietnam National Petroleum Corporation is an organization with asystem of technical facilities and a network of oil trading covered on the computersystem nationwide Over 55 year of construction and growth, Vietnam NationalPetroleum Corporation has constantly upgraded and continuously developed,making worthy contributions to the nation’s victory in the national resistance warand national construction Today, as a special ranked enterprise, the corporationcontinues to manage the key role of supplying petroleum and petrochemicalproducts for economic, development national security assurance, socialconsumption and participation normally stabilize the petroleum market, effectivelycontributing to the modernization of the country in the process of regional andworld economic integration

2 Petroleum products

2.1 Gasoline Ron 95

The higher the octane number, the higher the resistance to detonation This is alsothe meaning of the number in the name of the gasoline: Ron 95 gasoline (or A95)has an octane rating of 95 Ron 92 gasoline or Ron 95 gasoline are essentiallymineral gasoline, taken from fossil fuels Fossil fuels contain high levels of carbonand hydrocarbons – formed by the anaerobic decomposition of dead organismsburied more than 300 millions years ago Products formed after burning fuelinclude gases CO and CO – gases that are very harmful to the environment 2

2.2 Biofuel E5 Ron 92

E5 gasoline is A92 gasoline mixed with 5% ethanol with a concentration of99.5% Ethanol in gasoline is prepared from compounds derived from plants andanimals, such as fats, grains, agricultural wastes (straw,…) According to studies,E5 biofuel when burned has low toxic emissions far superior to conventional fossilfuels

2.3 Diesel Oil (DO)

DO oil is produced mainly form the gasoil segment and is a product of the directpetroleum storage organization, with all the physicochemical properties suitable

for Diesel engines without the need to use chemical transformation files However,from 1 January 2016, oil product DO 0.25% stopped circulating on thest

Vietnamese market at the proposal of the Ministry of Science and EnvironmentThus, currently on the domestic market, only 0.05S DO oil is circulated 2.4 Kerosene (KO)

Kerosene – a fuel widely used in daily life In Vietnam Kerosene is used forlighting, industrial applications … Kerosene or Kerosin is a mixture of colorless,flammable liquid hydrocarbons At one time it was used as fuel for kerosenelamps, now it is mainly used as jet fuel A form of kerosene, RP-1 which burn inliquid oxygen, is used as a rocket fuel In many parts of the world, kerosene isused as a heating fuel and used in stoves for cooking and as a solvent in industrialplants Kerosene is usually colorless, or has purple kerosene The lighter the colorof the kerosene (the more colorless it is), the higher quality ( the bright, hot flame,less smoke, less oil loss)

CHAPTER 1: THEORETICAL BASIS1 Theory of demand

The quantity demanded of any good is the amount of the good that buyers arewilling and able to purchase

Law of demand: the claim that the quantity demanded of a good falls when theprice of the good rises, other things equal.

Demand schedule: a table that shows the relationship between the price of a goodand the quantity demanded

The quantity demanded in the market is the sum of the quantities demanded by allbuyers at each price

Demand curve shifters

The demand curve shows how price affects quantity demanded, other things beingequal

These “other things” are non-price determinants of demand (i.e things that,determine buyers’ demand for a good, other than the good’s price)

Changes in them shift the curve… DFactors that change the demand curve:

Price# of buyersIncome

Price of related goodsTastes

2 Theory of supply

The quantity supplied of any good is the amount that sellers are willing and able tosell

Law of supply: the claim that the quantity supplied of a good rises when the priceof the good rises, other things equal

Supply schedule: A table that shows the relationship between the price of a goodand the quantity supplied

The quantity supplied in the market is the sum of the quantities supplied by allsellers at each price

Supply curve shifters

The supply curve shows how price affects quantity supplied, other things beingequal

These “other things” are non-price determinants of supply Changes in them shift the curve… S

Factors that change the supply curve:Price

Input PricesTechnology # of SellersExpectations

Facing a surplus, sellers try to increase sales by cutting price This causes QD torise and QS to fall…

Prices continue to fall until market reaches equilibrium

Shortage (a.k.a excess demand): when quantity demanded is greater than quantitysupplied

Facing a shortage, sellers raise the price, causing QD to fall and QS to rise,Prices continue to rise until market reaches equilibrium

CHAPTER 2: ANALYZE GAS MARKET IN VIETNAM1 Demand of the gas market in Vietnam

1.1 INCOME

According to the General Satistics Office’s reporton the impact of the Covid-19 epidemic on theemployment situation in the quarter of 2022, theaverage income of workers nationwide reached6.4 million VND/month, an increase of 1 millionVND compared to the previous quarter.

According to the International Labor Organization(ILO), the unemployment rate has improved(down 135.2 thousand people compared to theprevious quarter and increased 357.5 thousandpeople over the same period last year), but thenumber is still over 1.1 million people.

Income is a determining factor in the purchasingpower of consumers As income changes,purchasing power changes, causing the demandfor goods and services to change.

Gasoline is a normal good so the demand for it ispositively related to icome Increase in incomecauses increase in quantity demanded at eachprice so demand of gas market is increasing.

1.2 TASTES

Taste is an important factor that businesses pay attention to when producing anddoing business.

Currently, when motorbikes become popular, consumers all particularly own atkind of the least one vehicle to definitely serve commuting as well as pretty othergenerally personal needs Especially now, motorbike manufacturers alwaysbasically create fuel-efficient cars with beautiful designs and reasonable costs, sothe demand for motorbikes increases Therefore, gasoline and motorbikes as oneof the complementary goods, when the quantity demanded for motorbikesincreases, the quantity demanded for gasoline also increases.

1.3 EXPECTATIONS

Before the Covid-19 epidemic, the demand forgasoline of the people increased After theoutbreak of the Covid-19 epidemic, the increasein gasoline prices made people worried, so thedemand for gasoline at that time decreased.Consumers always expect rising prices to

decrease in the near future Understanding the expectations of consumers, theprice of petroleum products has tended to decrease compared to the previousquarter In April , when gasoline prices fell, people predicted that gasoline pricesmight increase again in the near future, so consumers rushed to buy gasoline toreserve so the demand for this item is trending increase again.

The gas market demand from 2014-2022 and forecast to 2025

1.4 THE NUMBER OF BUYERS

The number of consumers using petroleum is large, so the demand increase.

The table supply and demand balance sheet of Vietnam’s petroleum market from2018-2022.

2 Supply of the gas market in Vietnam

Gas prices per litre, octane-95: We show prices for Vietnam from 31-Jan-2022 to 09-May-2022 The average value for Vietnam during that period was 27,926.17 Vietnamese Dong with a minimum of 24,801.70 Vietnamese Dong on 31-Jan-2022and a maximum of 30,580.00 Vietnamese Dong on 09-May-2022 For comparison,the average price of gasoline in the world for this period is 42,937.42 Vietnamese Dong Use the drop menu to see the prices in gas.

How are high fuel prices impacting the economy?

Nationwide, the higher fuel prices have businesses concerned as they want tobalance price increases with keeping customers as Vietnam looks to bounce backfrom last year’s lockdowns.

Gasoline prices have a significant impact on both production and people’s dailylives, as well as on the competitiveness of enterprises Thus, when gasoline pricesincrease, it will raise the cost of input materials both directly and indirectly.

Directly for people, businesses, and industries that consume petroleum productssuch as road transport, fishing, agricultural production, food processing, andindirectly for any other businesses that demand the transport of goods from theplace of production to the place of consumption, affecting the price of consumergoods.

Higher fuel prices have posed a dilemma for many transport companies whether tocontinue or suspend their business Continuing to operate will result in losseswhile suspending operations may result in a loss of revenue and competition aswell as disruption to loans While many want to increase fares this may lead to adecline in the number of passengers who already have low demand amid thepandemic.

The fuel price hikes have also already led to an increase in the prices of someproducts Tires and lubricants, for example, have gone up by 20-30 percent Sometransport services have increased prices by 5-10 percent.

The retail industry has also been hit by price hikes Fuelprice increases have had knock-on effects as thesebusinesses have to pay extra fees for delivery and inputmaterials Some food and beverage establishments havealso raised their prices by 20-30 percent.

The logistic industry is facing pressure and has increased prices, while themanufacturing sector is also facing difficulties Small traders in markets have alsolooked to increase prices to cut losses.

Further, when fuel prices continue to rise at such rates, the recent 2 percent cut inVAT, which is supposed to boost consumer spending and stimulate the economy,may have limited effect.

The high fuel prices have also raised concerns about rising inflation and itsnegative impacts on Vietnam’s overall GDP affecting the consumer price indexand inflation.

10 percent increase in fuel prices will lower GDP by around 0.5 percent and hikeCPI by 0.36 percentage points.

Last week, HSBC also raised its inflation forecast for Vietnam from 2.7 percent to3 percent this year after taking into account the higher energy prices In the